Freshglen P/L v Idacorp P/L

[2000] QCA 500

SUPREME COURT OF QUEENSLAND

CITATION:

Freshglen P/L & Ors v Idacorp P/L & Anor [2000] QCA 500

PARTIES:

FRESHGLEN PTY LTD ACN 062 571 313
(applicant/first respondent)
HUISMAN BUILDERS PTY LTD ACN 053 115 272
(second applicant/second respondent)
ANTHONY JOHN HUISMAN and VICKI LEE HUISMAN
(third applicants/third respondents)
v
IDACORP PTY LTD ACN 010 827 040
(first respondent/first appellant)
DONALD WILLIAM ALLEN
(second respondent/second appellant)

FILE NO/S:

Appeal No 617 of 2000
SC No 8722 of 1998
SC No 7499 of 1998
Misc No 26 of 1998
OS No 16 of 1998

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

8 December 2000

DELIVERED AT:

Brisbane

HEARING DATE:

11 October 2000

JUDGE:

de Jersey CJ, McMurdo P, Helman J
Separate reasons for judgment of each member of the Court, each concurring as to the order made.

ORDER:

Appeal dismissed with costs to be assessed.

CATCHWORDS:

PARTNERSHIP – RIGHTS AND DUTIES OF PARTNERS INTER SE – ACTIONS AND PROCEEDINGS AT LAW BETWEEN PARTNERS OR BETWEEN FIRM AND PARTNERS – manner of proceedings

PARTNERSHIP – RIGHTS AND DUTIES OF PARTNERS INTER SE – ACTIONS AND PROCEEDINGS AT LAW BETWEEN PARTNERS OR BETWEEN FIRM AND PARTNERS – appellants challenged rulings on four objections to partnership accounts – whether objections determined unfavourably to appellants on a basis inconsistent with that adopted for the respondents at an earlier hearing – whether respondents adopted ‘inconsistent hypotheses’ in claiming reimbursement for expenses they had unsuccessfully earlier submitted were not made in the partnership context

PARTNERSHIP – RIGHTS AND DUTIES OF PARTNERS INTER SE – CAPITAL, ADVANCES AND SHARE OF PROFIT OR LOSS – whether agreement to contribute capital equally defined sufficiently an agreed ‘amount’ for purposes of s 27

PARTNERSHIP – PARTNERSHIP PROPERTY – DEALINGS WITH PARTNERSHIP PROPERTY – whether land sale ‘necessarily done for the preservation’ of partnership property, rendering advertising costs incurred in ‘ordinary and proper conduct’ of business

PARTNERSHIP – RIGHTS AND DUTIES OF PARTNERS INTER SE – ACTIONS AND PROCEEDINGS AT LAW BETWEEN PARTNERS OR BETWEEN FIRM AND PARTNERS – whether judge entitled to regard certain accounts as settled

Partnership Act 1891 (Qld), s 27, s 27(b)(i), s 27(b)(ii)

Millar v Craig 6 Beav 433, referred to
Muschinski v Dodds (1985) 160 CLR 583, distinguished

COUNSEL:

DR Cooper SC for the appellants
PE Hack for the respondents

SOLICITORS:

Lees Marshall Warnick for the appellants
Macrossan & Amiet for the respondents

[1]      de JERSEY CJ:  The appellants challenge a learned judge’s rulings on four objections to partnership accounts.

[2]      Mr Cooper SC, for the appellants, raised a fundamental concern as to the manner of the proceedings.  He submitted that issues involved in the bases for his Honour’s rulings should have been the subject of pleading, by way he suggested of a separate claim and counter claim, with disclosure of documents, and then later the oral hearing.

[3]      But the action took a perfectly usual course, with first a hearing determining the scope of the partnership relationships, then later, with that established, a hearing relating to the accounts.  Draft accounts were prepared and exchanged, with the parties able to furnish written objections.  We were referred to an apparently precise example of that.  A subsequent hearing included oral evidence.

[4]      Mr Cooper raised with us  a generalised complaint about the adequacy of disclosure of documents, but no complaint about that matter was raised before the learned judge, as should have occurred were there any substance to the matter.

[5]      In relation to the final of the objections pursued on appeal, the learned judge relied on there being a settled account.  The judge himself raised that point during submissions after the oral evidence had been given.  Mr Cooper submitted unsuccessfully before His Honour that such a defence should not be considered. Insofar as he now contends that the issue may have raised matters which should have been explored through oral evidence, it is significant that that aspect was not raised with the judge: there is no reason to think that had application been made to call further evidence, the judge would not have agreed in that course.  The complaint about procedural aspects is without substance.

[6]      Mr Cooper’s other broad submission challenged the learned judge’s determining objections, unfavourably to the appellants, on a basis inconsistent with that adopted for the respondents at the first hearing.   For example, the first objection concerns the claim of Freshglen Pty Ltd to be reimbursed by the Pirates Cove partnership for expenses of $61,256.93.  The position taken by Mr Huisman, a director of Freshglen, in relation to the proceedings determining the scope of the partnership relationships, was that Freshglen was not, when making those payments, acting in the context of any partnership relationship.

[7]      The learned judge held, however, that a partnership relationship did exist, and characterised the expenditure as incurred for its purposes.  He thereby rejected Mr Huisman’s claims and objectively characterised the expenditure as incurred for partnership purposes.

[8]      This is not a case of Freshglen’s concurrently adopting what Mr Cooper styled “inconsistent hypotheses”.  He referred to Muschinski v Dodds (1985) 160 CLR 583, 601-2, 624), but that would not seem relevant to this point. The matter may be put simply: having failed on the partnership point, Freshglen was then entitled, accepting the judge’s contrary determination, to argue that these should nevertheless be regarded as partnership disbursements, because relevant to its business.

[9]      The position taken by the learned judge in determining the first objection was open.

[10]      The second objection concerns his Honour’s allowance of interest at 6% per annum on the extent by which Freshglen’s capital contributions exceeded those of the appellant Idacorp Pty Ltd.  The respective contributions were $255,096,16 and $12,103.09.

[11] Section 27 of the Partnership Act provides that subject to any contrary agreement (and here there was none), a partner making any payment “beyond the amount of capital which the partner has agreed to subscribe” becomes entitled to interest.  There was, certainly, no agreement about any particular amount of money to be subscribed in this case, and that was the aspect emphasised by Mr Cooper. But the judge found that the parties agreed to contribute equally, and the document set out in paragraph 36 of the reasons for judgment provides, with the evidence putting it in context, a sufficient basis for that finding.

[12] The circumstance that no particular amount to be contributed was in dollars and cents agreed upon does not mean that s 27 was not enlivened: it was enough to render that provision applicable that the parties had agreed to contribute equally, and that that did not occur. Agreeing to contribute as much as one’s co-partner sufficiently defines, for this section, the “amount” one agrees to subscribe. Its purpose is to compensate where one partner contributes more than required. Here that purpose can sensibly be fulfilled – by the approach the judge adopted.

[13]      The third objection relates to Freshglen’s claim for $1,824.10, advertising costs in respect of the marketing of the Pirates Cove land.  I set out His Honour’s reasoning:

“The basis of the objection is that such liability is not a debt or liability incurred on behalf of the partnership and is not recoverable pursuant to ss 10, 27 or 42 of the Act.  The land was advertised for sale by Freshglen in local Mackay newspapers on 13, 20, 22, 23, 24, 26 and 30 June 1998 and on 2,4,10,11,13,14,16 and 18 July 1998.

Idacorp, which had knowledge of the newspaper advertisements from the outset, did not communicate any objection to the sales to Freshglen but lodged a caveat on 17 July and gave notice of it that day to Freshglen’s solicitors.  The date set for the auction was 18 July.  Mr Allen gave evidence that he sought legal advice immediately upon the proposed sale coming to his attention.  The inference to be drawn from his evidence was that any delay in taking action was as a result in delay on the part of his solicitor.  I do not accept that evidence with the result that there is no plausible explanation for the delay.

It is not contended by Idacorp that a sale of the land was inappropriate or that the advertising process was in any way flawed.  The point relied on is that the sale was without consent.

Clearly the purpose of the expenditure was to realise a partnership asset, even though Freshglen did not recognise the existence of the partnership at the time.
The sale of the property was necessary for the preservation of the partnership property and was in the ordinary and proper conduct of the business of the partnership.  It was clear that the asset would have to be realised and that it was contrary to the interests of the partnership to continue incurring holding costs.  It was not suggested that the timing of the sale was wrong or that the sale price sought was inadequate.  Accordingly, the objection fails.”

[14] The learned judge’s conclusion was that it was in the interests of the partnership to sell that land to avoid incurring further holding costs. Once he found that the land was an asset of the partnership, it was reasonable objectively to characterise the expenditure as occurring in the “ordinary and proper conduct” of its business, despite Mr Huisman’s claims that he had been acting for Freshglen alone: the judge rejected that contention, as he was entitled to do. That left the incurring of expense by one partner, to facilitate a necessary sale of partnership property, where the sale was in the interests of the partnership. That partner had power to bind the firm (s 8). Such a sale was, for such a partnership, “ordinary and proper”. The amount therefore fell to be reimbursed under s 27 (b)(i).

[15] The judge properly relied also on s 27 (b)(ii), concluding the sale was “necessarily done for the preservation” of the partnership property. This view was criticised on the ground one does not preserve land by selling it. What happened however was the conversion of one species of this partnership’s property, land, into another, money. The judge was entitled to conclude, as a matter of fact, that this conversion was “necessary” because of the need to avoid the unnecessary incurring of the holding charges.

[16]      The fourth objection concerns the learned judge’s allowance of the $95,000 debt of  the Dolphin Quays partnership to Freshglen.  The judge regarded the 1995 partnership accounts prepared by Mr Allen, a director of the appellant Idacorp, which showed this credit in favour of Freshglen, as a settled account which bound the parties.  In so doing, the judge rejected Mr Allen’s subsequent claim that the accounts were merely provisional, and in this respect inaccurate.  The position thereby reached by the judge happened to accord with his conclusions drawn from other evidence anyway.  The judge was entitled to proceed in this way (cf Millar v Craig 6 Beav. 433; Lindley on Partnership, 14^th ed, page 569).

[17]      The appeal should be dismissed with costs to be assessed.

[18]      McMURDO P:   I agree with the reasons for judgment of the Chief Justice and with the order he proposes.

[19]      HELMAN J:   I agree with the order proposed by the Chief Justice and with his reasons.